ConocoPhillips cuts capex, but dividend remains king
ConocoPhillips (ticker: COP) held its annual analyst day this week, trimming capex like many of its peers, but reasserting the company’s commitment to maintaining its dividend payout.
The company plans to cut capex by 28%, more than their large-cap peers like YPF (3% cut), Statoil (8% cut), BP, Total (11% cut each) and ExxonMobil (12%), but still less the average of 34% in capital budget cuts from a total of 65 smaller companies compiled by EnerCom. The company expects its capital budget to average $11.5 billion per year from 2015 to 2017. The budget will focus on short-cycle, liquids-rich unconventional resources, particularly the Eagle Ford and Bakken, but also the Permian to a lesser extent. The company plans to reduce major project spending by 45% while increasing the budget for unconventional/conventional development by 50%.
ConocoPhillips plans to be cash flow neutral by 2017, despite low oil prices. Pavel Molchanov, an analyst with Raymond James, summarized the COP’s position by saying: “The company is pursuing operating costs reductions of $1 billion through 2017 via lower G&A and capturing cost deflation, with half of this set to be achieved this year. If the cash neutrality target were to be at risk, the main flex variable would be unconventional spending.”
During the company’s presentation, COP reiterated its position on maintaining its dividend and increasing payouts over time. Ryan Lance, Chairman and CEO of ConocoPhillips, said: “The dividends are top priority use of our cash. We will pay our shareholders first.”
ConocoPhillips’ full presentation can be found by clicking here.
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